Benefits of Virtual ADR in Insurance Disputes: Ten Reasons To Consider Resolving Disputes Virtually

There has been a lot of talk lately, and a lot of presentations, about the pros and cons of virtual alternative dispute resolution (ADR)—video arbitrations and mediations. I recently participated in one such program, but it had a slightly different twist since it was focused on insurance litigation and the insurance industry.

While many of the pros and cons of virtual ADR are generally applicable to a wide range of matters, some have special importance in the context of insurance disputes. In part, this is because insurance companies are in the business of handling insurance claims and litigation. Unlike many businesses, where litigation may be a rarity, disputed claims are commonplace in the insurance industry. As a result, the cost and efficiency of handling claims and disputes are critical and can make virtual ADR extremely attractive.

Time and scheduling. Two of the common obstacles to traditional in-person ADR —both mediation and arbitration—are time and scheduling. In large commercial mediations, the parties, including the policyholder, the insurers, the relevant lawyers and experts, and the mediator are commonly spread across the country, and often around the world. A mediation in such a case requires travel to get to the mediation, a full day or two in the proceedings and frequently another day to get home, especially where the mediation runs late into the night in an effort to achieve a settlement. The time and expense of travel and downtime can be avoided by having a virtual proceeding, as can the need to reserve an entire day when it is not necessary for a session. The case handler, the lawyers and others involved can use the time to manage other claims and matters, significantly increasing productivity.

Flexibility. While the savings from the elimination of travel and downtime are fairly obvious, it may be useful to illustrate the flexibility of virtual proceedings with an example. Consider a large environmental or mass tort coverage case. A first step in a mediation is commonly a presentation by defense counsel and coverage counsel concerning the underlying case and the relevant insurance. In some cases, this is followed by a discussion of information needs. Policyholders are often frustrated when they have traveled and set aside a day but are told after the initial presentations that an insurer needs to consult with the home office to get authority. In a virtual setting, this initial session can be limited to a discussion of the case and the exchange of information necessary to move forward with negotiations.

Access to authority. As much as mediators typically insist on the attendance of persons with authority to settle, insurance mediations often run into issues of authority. In some cases, the insurer did not expect to enter into active negotiations at an initial session. In others, an adjuster came with authority, but needs more to settle a case. In either situation, a virtual mediation permits a more senior company representative of either party to participate in some or all the process. This can be a major advantage and can help to avoid the frustration of an inability to move forward associated with  the absence of a more senior representative. Senior managers who lack the time or inclination to take several days to attend a mediation are often willing to participate virtually. A similar dynamic occurs in virtual arbitrations where senior decision-makers may want to watch a key witness or argument without having to travel and be present for an entire, proceeding.

Access to coverage counsel in mediating an underlying case. The flexibility provided by virtual ADR can be particularly beneficial where there is a substantial case, perhaps a class action or mass tort case, and insurance is an important component of the parties’ ability to settle. Parties are often reluctant to incur the time and expense of having coverage counsel attend a mediation of the underlying case, but then reach an impasse because the coverage issues and availability of insurance are critical to their ability to settle. Virtual mediation allows the participation of coverage counsel and underlying counsel, together or individually as needed. The ability to bring the right parties together at the right times, without necessarily having them all in the same physical location, is a major benefit of virtual ADR.

Access to multiple players. A unique element of many insurance disputes is the number of players involved. This may occur where there are towers of insurance with multiple insurers, multiple years of relevant coverage or multiple insurance programs potentially in play. In each of these scenarios, finding a time and place where lawyers and company representatives for all the players can participate may be very challenging, particularly where some of the insurers are based in London or other non-U.S. markets. Virtual ADR makes it much easier to schedule a mediation or arbitration session, including during hours outside the traditional workday since participants may be willing to participate from home or office early in the morning or in the evening.

Access to experts. It is often useful to have an expert attend a mediation.  It may be an expert on underlying liability, a coverage issue, lost policies or allocation. Direct discussions between the parties and the experts can help the parties to understand and test their adversary’s positions and, in some cases, the credibility of the experts or their positions. Experts can be available virtually, reducing the time and expense of attendance.

Less idle time. Another advantage of virtual ADR in multi-insurer disputes is the ability to break up the discussions into smaller chunks. All of us have experienced the frustration of sitting idly while the mediator moves from room to room, trying to get a sense of each party’s respective position. A virtual proceeding can be broken into separate sessions, with the mediator meeting with each party individually. This approach has proven very effective in multi-party cases.

Training. Many insurers have strict requirements about use of multiple attorneys at a hearing. This is especially relevant where travel is involved. Virtual proceedings allow the additional attendance of a less senior attorneys or client representatives at a substantially lower cost. Whether that cost is borne by a client or its law firm, it provides an important training opportunity in virtual proceedings.

Expanding the pool of available mediators. Because disputes can occur anywhere, parties have traditionally tried to agree on a locale for the mediation and to find a mediator in that location in order to capitalize on local knowledge and to avoid the time and expense of travel. In some cases, the parties agree on an out-of-town mediator because the mediator is mutually acceptable and viewed as exceptionally talented and able to understand complex issues in a particular case. In the virtual world, location is much less important, thus widening the pool of acceptable, available mediators.

Avoiding the abrupt race to get home. Mediations often pick up pace as the day wears on. In many cases, however, that momentum is disrupted by one of the participants having to abruptly stop to race for a plane or a train. While that time pressure can sometimes be productive, it can also be extremely frustrating to parties that feel they are on the cusp of getting a matter resolved and are committed to staying as long as it takes. This situation can often be avoided in a virtual mediation where the parties are appearing from home or their offices.

There are certainly challenges with virtual proceedings. Parties need to be comfortable with the technology and have the proper equipment. They need to be comfortable interacting with and reading each other onscreen as opposed to in person. There may be challenges of logistics and personal style.  But many experienced mediators are finding that virtual mediations have significant benefits and that their success rate is similar to that of in-person mediations. These benefits have special significance for insurance disputes and suggest that virtual ADR, whether fully virtual or a hybrid, will be an important tool for claims handlers and coverage advocates for the foreseeable future.

Based in Chicago, Steven Gilford, Esq., is a JAMS mediator and arbitrator specializing in commercial and insurance disputes nationally and in the London and Bermuda markets. Before joining JAMS, Mr. Gilford spent 40 years in private practice litigating and resolving insurance and commercial matters in courts, mediations and arbitrations in the U.S. and other jurisdictions.